Best stock to invest in
Nasdaq) has been in the headlines recently – some
pointing to solid fundamental progress, others ‘not so much.’
Amyris recently announced a new relationship with Givaudan (GIVN: VX), a
supplier of active ingredients for cosmetics. The two have
agreed to collaborate in research and development on proprietary
fragrances. Earlier this month Amyris announced the launch by Takasago
International Corporation (TYO: 4914) of a new fragrance
created with Amyris’ technology. Cosmetics and fragrances present
large market opportunities and the strength of demand for personal
care products supports strong profit margins. The
relationships are likely to lead to incremental sales for Amyris.
Yet it was just a week ago that Amyris announced the company was
crosswise with Nasdaq. Apparently, the bid price for AMRS
shares has been below $1.00 for 30 consecutive trading sessions,
violating a minimum listing requirement for the Nasdaq Global Select
Market where AMRS trades. There is no reason to panic just
yet. The company has six months to come into compliance.
Still the notice from Nasdaq puts a spotlight on the struggle that
developing companies face – trying to get established in
highly competitive markets for their products and technology while
clinging to whatever access to capital they might establish.
Amyris has been able to build up revenue to $34.1 million in the
most recently reported twelve months ending March 2016. Of
course, the company is still operating with a deep loss as research
and development efforts still eclipse revenue. The net loss
during that period was $184.9 million or $1.26 per share. More
importantly the company used $105.6 million in cash resources during
that period to support operations.
Since cash on the balance sheet was only $9.3 million at the end of
March 2016, there is some real concern for Amryis’ future.
Granted the company executed a small private placement in May 2016,
bringing in about $15 million in new capital net of fees. That
has provided some breathing room for the company. Then, if
Amyris is closer to selling its Biofene-branded farnesene chemical,
the future might not see as bleak as suggested by the balance
sheet. Farnesene is a renewable hydrocarbon chemical that is
the building block for a range of products such as cosmetics,
detergents and lubricants. It shows promise for high-volume
applications and large market opportunities. In May 2016, the
company announced a new relationship with CJ CheilJedang Corporation
(097950: KS), a Korean contract manufacturer, to provide
high volume production of farnesene for Amyris. Unfortunately,
it will take until at least the third quarter for the two to hammer
out a definitive agreement, which suggests that revenue is not
likely until well into 2017.
Priced at about $0.40 per share, AMRS appears fairly priced as an
option on management’s ability to bring together the right elements
of technology, commercial products and paying customers. Until
more commercial relationships are in place or the existing
relationships begin producing revenue, there is probably no
justification for a higher price.
Debra Fiakas is the Managing
Director of Crystal Equity
Research, an alternative
research resource on small capitalization companies in selected
Neither the author of the Small Cap
Strategist web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.
– Best stock to invest in